Bitcoin Could See a Massive Squeeze as Funding Rates Flip “Extremely Negative”

  • Bitcoin’s price action has been lackluster as of late, providing investors with few insights into the cryptocurrency’s near-term outlook as it consolidates
  • Although from a technical perspective, it remains unclear as to where it might trend in the near-term, there are a few factors that may provide investors with some guidance
  • One such factor that could have some influence over the digital asset is its funding rates, which have flipped negative throughout the past few weeks
  • Extremely negative funding is oftentimes viewed as a counter-indicator, suggesting that significant upside is imminent in the days and weeks ahead
  • One analyst is expecting Bitcoin to see an intense short-squeeze as bulls liquidate overzealous short-positions

Bitcoin and the entire crypto market have been caught within the throes of a consolidation phase. This has done little to offer insight into where the cryptocurrency market trend in the days and weeks ahead.

BTC’s trading range, which was first formed a couple of weeks ago, exists between $10,200 and $11,200. Both of these levels have been holding strong, with bulls and bears being unable to make any meaningful advances towards them.

Where the benchmark cryptocurrency trends next may be heavily influenced by its negative funding rates.

At the moment, it is quite expensive to sit within short positions due to the high demand from traders to have sell-side positioning.

One analyst thinks this will catalyze an intense “short squeeze.”

Bitcoin Consolidates as Traders Flip Short 

At the time of writing, Bitcoin is trading sideways at its current price of $10,630. This is where it has been trading for the past few hours.

Despite not having any clear momentum, demand for short positions is incredibly high, which has caused funding rates to dive into extremely negative territory.

This means it is costly to sit within a short position, and profitable, by default, to have long exposure.

Analyst: Negative Funding to Spark a Short Squeeze

One trader noted that the massive number of open short positions could open the gates for Bitcoin to see a notable short squeeze in the near-term.

He notes that although he is sitting out of the chop, he wouldn’t be surprised to see Bitcoin’s price rally higher in the near-term.

“This BTC funding… About as high as I can ever remember. Wouldn’t be surprised to see a pop up to squeeze overzealous shorts at HTF support. Personally still sitting out of the chop,” he said.

Where the market trends in the coming days will depend solely on Bitcoin. As such, a short squeeze that can potentially help shift its trend into bull’s favor could also allow altcoins to see explosive momentum.

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